Currency values can change for many reasons. Sometimes they react to external political and economic news, such as Great Britain’s proposed exit from the European Union. At other times, value changes are driven by trading in the market itself. Often, both external and internal events drive currency value changes on the Forex.

When, for example, the U.S. Dollar is strong, companies in the United States may increase their purchases of European products, which have become correspondingly less expensive. To pay for these products, they exchange US Dollars for Euros. When large quantities of dollars are exchanged for Euros over a short time period, the demand for Euros increases.

Consequently the value of the Euro increases and the value of the US Dollar decreases.

Currencies are traded by individual retail investors, financial institutions, and corporations doing business. Retail investors and banks are trading to make profits and corporations usually trade in the normal course of the international business process.